Minimum Wage Advances Despite GOP Obstruction

The Gap announced this week it is raising the minimum wage that it will pay employees. Walmart said it is considering doing the same. Last year voters in New Jersey and many municipalities passed minimum wage increases. President Obama ordered federal contractors to raise the minimum they pay.

The minimum wage is moving forward because people want it, but in Washington Republicans continue to obstruct this (and everything else).

The Gap

Clothing retailer The Gap announced they will raise the minimum wage paid to their employees to $9 now and $10 next year. The Gap said this will motivate employees and they expect this “to deliver a return many times over.”

In an interview, [Gap CEO] Murphy said a “reserve-in-store” program instituted about 18 months ago required a skilled, motivated and loyal sales force to help customers who visited the stores to pick up items reserved online and perhaps persuade them to buy matching apparel or shoes.

He said that after the company invested heavily in technology to create this program, “We’re going to need to assure that we have the best talent in our store.”

“We have very good people today but to attract and retain the best talent we have to make sure we invest in them,” he added.

While many retailers claim that they cannot afford to pay the minimum wage without firing employees or raising prices, research shows that companies paying low wages stand to benefit from the huge stimulus a wage hike would bring to poor workers who spend most of their income on basic needs like food and clothing. Even Walmart, one of the most notoriously low-paying companies, announced Wednesday it would consider supporting a minimum wage hike, acknowledging that it would generate extra pocket money for Walmart’s typically low-income customers. Additionally, employees tend to work harder andstay at their company longer after their wages increase.

Chains like Costco, Whole Foods, Boloco, and In-N-Out Burger have all embraced higher wages for these reasons.

“Even” Walmart

Walmart has also said that it is “considering” supporting the increase in the minimum wage to $10.10. One reason for this is that so many people are so poor now that Walmart’s sales are flat. Walmart (the bottom) risks losing customers to dollar stores (below the bottom). Increasing the minimum wage would stop this. Note that things are also so bad that their sales have also been hurt by cuts in the Supplemental Nutrition Assistance Program (SNAP, or food stamps).

The world’s largest retailer, which gets more than half its sales from groceries, on Thursday gave a disappointing full-year forecast. It blamed sharp cuts in food stamp benefits and higher payroll taxes that are will hit disposable income for its core customers. Wal-Mart shares fell 2.2 percent in morning trading.

… The cuts last year to benefits under the Supplemental Nutrition Assistance Program, the largest U.S. anti-hunger program, have been particularly painful for Wal-Mart. One in five Wal-Mart shoppers relies on food stamps, according to Cowen analyst Tal Lev. Wal-Mart also faces stiff competition from dollar stores for lower-income shoppers.

Lydia Depillis at the Washington Post’s Wonkblog, explains, in “Why backing the minimum wage hike makes sense — for Wal-Mart.” Walmart’s wages “…set the standard for everyone around it as well. Its core shoppers are also those making minimum wage in other establishments. When they can’t spend much, rather than saving by shopping at Walmart, they’ll go to dollar stores instead — a lesson the company learned when food stamps were cut this year. A hike to $10.10 would mean 900,000 are no longer poor.”

She also points out that “Wal-Mart also is much better able to absorb a minimum wage increase than its smaller competitors — especially if everybody has to pay it.”

The CBO Estimate

The Congressional Budget Office (CBO) released an estimate of the economic impact of a minimum wage increase, saying that an increase could reduce full-time employment by approximately 0.3 percent – the equivalent of roughly 500,000 positions – by 2016. (Note this refers to people who might not be hired.) The CBO estimate is not in line with real-world studies that looked at what happens when the wage is actually raised in actual states and counties, compared to what happens in neighboring states and counties where it is not raised. These studies find no job loss.

The CBO report, according to some economists who have studied it, has likely underestimated job gains from people having more money to spend. Increasing the minimum wage would mean more customers coming in the door, with more money to spend. This is a prescription for hiring more employees, not laying them off.

The American majority

This comes last because it is apparently what matters least to the lawmakers in DC – what does the American Majority want? They want the minimum wage increased.

Voters in key 2014 battleground states made it clear in a new poll conducted by Hart Research Associates that raising wages, higher living standards and fair treatment are among their top priorities, and they want political leaders to do more on these issues. Nearly 60% of the surveyed voters from Florida, Michigan, Ohio, Pennsylvania and Wisconsin are unhappy with their state’s economy. More than 90% said they are only keeping even economically or falling behind. More than 70% say that raising wages would be good for their state, despite claims that raising wages would increase prices or cost jobs. Gubernatorial candidates who say they want to raise the minimum wage to $10 an hour would be more likely to be voted for by 61% of the voters surveyed, compared to only 23% who would be less likely to vote for such a candidate.

About Dave Johnson

Dave has more than 20 years of technology industry experience. His earlier career included technical positions, including video game design at Atari and Imagic. He was a pioneer in design and development of productivity and educational applications of personal computers. More recently he helped co-found a company developing desktop systems to validate carbon trading in the US.